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Advocacy

When we see legislative developments affecting the accounting profession, we speak up with a collective voice and advocate on your behalf. Our advocacy partners are state CPA societies and other professional organizations, as we inform and educate federal, state and local policymakers regarding key issues.

The AICPA Tax Reform Resource Center is your home for comprehensive coverage on tax reform. This page is your go-to for news, resources, videos, podcasts, learning, and AICPA advocacy positions. Bookmark this page and visit often for updates.

Stay up to date with the latest developments in tax reform by listening to our featured video. Learn what is going on in Washington that may impact you and your clients, and what to expect with potential tax law changes. We will update our featured video frequently so you'll have the latest insight at your fingertips.

This series of frequently asked questions (FAQs) provides answers to questions we are hearing from our members about the Tax Cuts and Jobs Act (TCJA).

General

The proliferation of new income tax provisions since the 1986 tax reform effort has led to compliance hurdles for taxpayers, administrative complexity and enforcement challenges for the IRS. The AICPA encourages Congress to examine all aspects of the tax code to improve the current rules. We stand for a code that is simple, practical and administrable (AICPA Guiding Principles of Good Tax Policy). The AICPA has consistently supported tax reform simplification efforts because we are convinced such actions will significantly reduce taxpayers’ compliance costs and encourage voluntary compliance through an understanding of the rules.

Download our tax reform changes charts for individuals and businesses. Use these charts as a reference for individual and business tax law changes that resulted from the Tax Cuts and Jobs Act (TCJA). These charts also provide practical client considerations based on the changes.

Individuals

Here are some highlights of the changes for individual taxpayers (from 2018 through 2025):

The top individual rate is 37%.

The individual AMT remains, but with increased exemption amounts and increased phase-out levels.

The mortgage interest deduction limit is reduced to $750,000 on new mortgages ($375,000 for a married couple filing a separate return) and only home equity loan interest on loans used for home improvements or traced to business, investment or passive activity expenditures remains deductible (see Sec. 163(h), Regs. Sec. 1.163-8T and Notice 89-35).

Individuals are allowed to deduct up to $10,000 in total state and local taxes, which include income or sales taxes plus property taxes. For state and local taxes previously deducted on Schedule C, E, or F, the limit does not apply.

The child tax credit is increased to $2,000, with up to $1,400 refundable. The phase-out level is increased so more individuals with children under age 17 will qualify for the credit.

Medical expenses in excess of 7.5% of adjusted gross income (AGI) are deductible in 2017 and 2018 and then 10% of AGI thereafter.

There are no personal or dependent exemptions under the new tax law.

No moving expenses are deductible (other than for U.S. armed forces members on active duty).

No alimony is taxable or deductible starting in 2019 for agreements executed after 2018.

Yes, generally, it would be deductible (subject to the limitation cap).

From 2018 through 2025, qualified residence interest only includes acquisition debt (not home equity debt). If a home equity loan was used for improvements to the principal or second home and secured by that home, it is acquisition debt and the interest is deductible.

A revised limitation exists for acquisition debt. Such debt may not exceed $750,000. A grandfather provision exists for acquisition debt incurred before Dec. 15, 2017. A special rule also exists for refinancing.

To determine if interest on a home equity loan is deductible, apply the tracing rules of Regs. Sec. 1.163-8T as modified by Notice 89-35 (pay particular attention to the 30-day rule of the notice). If the loan was used for improvements to the principal or second residence and secured by that residence, it likely qualifies as acquisition debt (within the new dollar limits).

Passthroughs

The corporate tax rate has been lowered to a flat 21%, effective in 2018. The legislation repeals the corporate alternative minimum tax (AMT) and provides for passthroughs a 20% deduction (known as the qualified business income or QBI deduction and claimed at the individual level rather than at the passthrough entity level). Every client’s situation is different. Therefore, it’s advisable to do an analysis for your business clients to help them determine if a change in entity structure is appropriate.

We’ve received questions from AICPA members about whether it might be better for CPA firms to organize as C corporations instead of passthroughs, given the lower corporate tax rate. We advise using extreme caution for two reasons: (1) switching could possibly raise taxes and (2) a firm could lose the benefit of the CPA brand.

Corporations

Here are some highlights of the changes for businesses:

The new corporate tax rate is a flat 21%.

The corporate alternative minimum tax (AMT) is repealed.

The deduction for business interest is limited to the sum of the following: business interest income, 30% of the adjusted taxable income (as defined in the new law), and the floor plan financing interest.

The rules allow taxpayers to claim a 100% first-year depreciation deduction on qualified property that is acquired and placed in service after Sept. 27, 2017. A phase-out period will begin in 2023 and end in 2027.

A fiscal-year corporation should determine its federal income tax for years that include Jan. 1, 2018 by first calculating the tentative tax for the entire taxable year using the tax rates in effect prior to the Tax Cuts and Jobs Act (TCJA) and then also calculating the tentative tax for the entire taxable year using the new 21% rate. Subsequently, the corporation should proportion each tentative tax amount based on the number of days in the taxable year when the different rates were in effect. The sum of these two amounts is the corporation’s federal income tax for the fiscal year. Refer to Notice 2018-38 for details.

International

The transition tax is also commonly referred to as the repatriation tax or the Sec. 965 tax. In general, U.S. shareholders are required to pay a transition tax on the post-1986 untaxed foreign earnings and profits (E&P) of certain specified foreign corporations as if those E&P had been repatriated to the U.S.

To be subject to a Sec. 965 inclusion, a taxpayer must be a U.S. shareholder of a deferred foreign income corporation (DFIC). A DFIC is defined as a specified foreign corporation (SFC) in Sec. 965(e). That SFC must also have post-1986 accumulated E&P to be construed as a DFIC.

U.S. shareholders subject to a Sec. 965 inclusion fall into two categories of an SFC. The first category is U.S. shareholders of a controlled foreign corporation (CFC), as defined in Sec. 957(a). To be a CFC, more than 50% of the voting power of all classes of stock entitled to vote or 50% of the total value of all stock must be owned by U.S. shareholders. A U.S. shareholder, with respect to any foreign corporation, is a U.S. person (as defined in Sec. 957(c)) who owns (within the meaning of Sec. 958(a)) or is considered owning by applying the rules of ownership of Sec. 958(b), 10% or more of the total combined voting power of all classes of stock entitled to vote of such foreign corporation, or 10% or more of the total value of shares of all classes of stock of the foreign corporation.

The second category of U.S. shareholders subject to Sec. 965 inclusions are U.S. corporations that own any share of a foreign corporation, whether that corporation is controlled or not.

Estates, gifts and trusts

Eliminating the estate tax was high up on the Republican tax agenda and was part of the Republican Blueprint and the House Nov. 16, 2017 version of the Tax Cuts and Jobs Act (TCJA). However, the legislation, as passed by Congress and signed by the President (enacted on Dec. 22, 2017), does not eliminate the estate tax. Rather, the tax exemption amount is doubled for tax years 2018 through 2025 from $5.6 million to $11.18 million per person, indexed for inflation.

Yes. The new qualified business income (QBI) deduction under Sec. 199A applies to taxpayers other than C corporations; thus, the deduction is available to estates and trusts.

Qualified business income (QBI) deduction (Sec. 199A)

The qualified business income (QBI) deduction of Sec. 199A is limited to 20% of the excess of taxable income over net capital gain. For example, suppose a taxpayer has $100,000 of QBI, $120,000 of capital gain, and $40,000 of deductions. Taxable income in this example is $180,000, and the excess of taxable income of net capital gain is $60,000. Thus, the tentative tax deduction of $20,000 ($100,000 QBI x 20%) is limited to $12,000 ($60,000 x 20%).

If taxable income is less than $157,500 (single) or $315,000 (married), then the QBI deduction is simply 20% of the lesser of QBI or taxable income other than capital gain (subject to the taxable income limitation), regardless of whether the business is a specified service business (SSTB) or whether the business pays W-2 wages.

If taxable income is greater than $207,500 (single) or $415,000 (married), and the QBI is from a SSTB, the QBI deduction is $0. However, if the taxpayer has QBI from other sources, a deduction is still allowed for the non-SSTB businesses. If the QBI is from a non-SSTB, the deduction is allowed, but is limited to the greater of:

50% of the taxpayer’s allocable share of the W-2 wages paid by the business, or

20% of the taxpayer’s allocable share of the W-2 wages paid by the business plus 2.5% of the taxpayer’s allocable share of the unadjusted basis of qualified property.

SSTBs include “any trade or business involving the performance of services in the fields of health, law, accounting, actuarial science, performing arts, consulting, athletics, financial services, brokerage services, or any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees or owners; or any trade or business which involves the performance of services that consist of investing and investment management, trading, or dealing in securities, partnership interests or commodities.” Engineering and architectural businesses are specifically removed from the definition of an SSTB.

The final regulations retain and slightly reword the definition of a trade or business set forth in the proposed regulations. Specifically, a trade or business is defined as a trade or business under Sec. 162 other than the trade or business of performing services as an employee. The final regulations also provide further interpretation of the disqualified fields.

The final regulations, similar to the proposed regulations, provide a de minimis exception that allows a business that has gross receipts of $25 million or less for the tax year to not be treated as an SSTB as long as less than 10% of the gross receipts of the business are attributable to the performance of services in one of the disqualified fields.

The AICPA is committed to being your home for all guidance and resources related to tax reform. Below are a variety of resources and other tools to keep you informed.

Guides, Tools and Templates

Sec.
199A QBI Supplement - Use this reference as guidance on the recently issued
Sec. 199A final regulations, how to calculate W-2 wages, a safe-harbor rule for
rental real estate and treatment of previously suspended losses. Open to Tax Section.

Tax Reform Quick Reference Guide – Get an overview of federal tax law changes and planning opportunities coming out of tax reform. Open to Tax Section and PFP Section.

TCJA Supplement – Use this Tax Cuts and Jobs Act primer as your go-to reference on how the new tax laws affect individuals and businesses.

Impact of Tax Reform on Planning Toolkit: Learn more about planning opportunities in light of the recent tax law changes in this compilation of planning resources. Open to everyone with some resources locked to PFP Section.

Tax Reform Planning Letters for Individual and Business Clients: Leverage tax reform opportunities by communicating with your clients on the recent changes and initiating planning conversations with these letters. Open to Tax Section, PFP Section and PCPS.

Sec. 199A Flowchart: Use this flowchart for determining the Sec. 199A qualified business income deduction. Open to Tax Section.

Tax Reform Changes Chart for Individuals and Businesses: Use these charts as a reference for the individual and business tax changes that resulted from the Tax Cuts and Jobs Act as well as practitioner tips for client considerations based on the changes. Open to Tax Section and PCPS.

Tax Reform Snapshot for Clients: With this brochure, communicate the recent tax law changes to your clients and encourage them to contact you for tax planning help. Open to Tax Section, PFP Section and PCPS.

Presentations on Tax Reform Updates for Individuals and Businesses: Use these presentations to add value to your client communications by highlighting key points of the new tax legislation. Open to everyone.

News Articles

Bonus depreciation safe-harbor rules for vehicles issued,The Tax Adviser, Feb. 13, 2019The IRS issued a safe-harbor procedure that taxpayers may follow for determining the deduction for depreciating passenger vehicles when they are eligible for 100% bonus depreciation but are also subject to the Sec. 280F limits on deductions for luxury automobiles.

Small business taxpayer exceptions under tax reform — Gross receipt aggregation rules, Tax Section Newsletter, Jan. 25, 2019Small business taxpayers benefit from several tax reform provisions that simplify tax reporting. In order to be eligible, a taxpayer must not be a tax shelter and can't have average annual gross receipts of greater than $25 million. The gross receipt aggregation rules look beyond the gross receipts of the tax return filer, which presents unique challenges for practitioners.

Final regulations govern Sec. 965 transition tax, The Tax Adviser, Jan. 16, 2019The IRS finalized proposed regulations issued last August on the new transition tax, which generally taxes the accumulated post-1986 deferred foreign income of a corporation.

Sec. 199A: Questions and answers, The Tax Adviser, Dec. 20, 2018Jeff Bilsky, CPA, senior practice leader for BDO’s national partnership taxation group, sat down recently for a question-and-answer session on guidance that has been issued on the Sec. 199A qualified business income deduction.

Proposed regs. govern tax on base-erosion payments, The Tax Adviser, Dec. 17, 2018The IRS issued proposed rules on the Sec.59A base-erosion anti-abuse tax (BEAT), one of a number of new international tax provisions added by the law known as the Tax Cuts and Jobs Act.

UNICAP rules on negative adjustments finalized, The Tax Adviser, Nov. 19, 2018The IRS issued final regulations on the use of negative adjustments under Sec. 263A’s simplified methods for determining costs that must be capitalized.

IRS issues proposed regs. for GILTI inclusions, The Tax Adviser, Sep. 14, 2018
The IRS issued proposed regulations implementing Sec. 951A’s global intangible low-taxed income provision, which requires a US shareholder of a controlled foreign corporation to include this income in the shareholder’s gross income.

Deemed personal exemption amount introduced for various tax benefits, The Tax Adviser, Aug. 28, 2018The IRS issued guidance on how it intends to interpret the exemption amount in tax years 2018 through 2025 in determining who is a qualifying relative for purposes of the various Code provisions that refer to the definition of a dependent in Sec. 152.

Qualified business income deduction regs. proposed, The Tax Adviser, Aug. 8, 2018The IRS issued guidance on the new Sec. 199A deduction for qualified business income in the form of proposed regulations and a separate notice on how to calculate W-2 wages for those purposes.

States sue over state and local tax deduction cap, The Tax Adviser, July 17, 2018
Four states have sued in U.S. district court, asking to invalidate the $10,000 limit on the deduction for state and local taxes enacted as part of last year’s tax overhaul.

Sec. 965 transition tax penalty relief issued, The Tax Adviser, June 5, 2018The IRS announced relief from late-payment penalties and that it will allow late elections for taxpayers subject to the new Sec. 965 transition tax on deemed repatriated foreign earnings.

It's important for CPAs to stay up-to-date with legislative changes, the dynamic political environment, and the profession's tax reform advocacy efforts. Our tax leadership and dedicated AICPA staff are regularly involved in a wide range of tax policy and advocacy activities, including discussions with Congressional offices, Treasury officials, IRS executives, and key stakeholders. Using AICPA’s Principles of Good Tax Policy as our foundation, we also regularly submit comments, including the following submissions that provide valuable suggestions on ways to improve our tax system:

Take advantage of the latest learning opportunities, including webcasts, conferences, and other CPE opportunities. As areas emerge, you can entrust the AICPA to sponsor superior events to help you remain the premier providers of tax services.

Webcasts

Tax Reform: Overview of Final Sec. 199A Regulations, multiple dates offered, 1-3pm ET, 2 CPE credits – Do your clients qualify for the qualified business income deduction? If so, how do you help them calculate the deduction? Robert Keebler provides an overview of the Sec. 199A deduction and how you can best help your clients take advantage of this new legislation.

Tax Reform: A Case Study Approach to Final Section 199A, multiple dates offered, 1-3pm ET, 2 CPE credits – Many questions surround the calculation of the Sec. 199A deduction. Join Robert Keebler as he runs through case studies to assess the deduction under various scenarios and provides some planning strategies surrounding Sec. 199A.

Self-Study

Tax Reform’s Impact on International Business, CPE self-study, 5.5 CPE credits – What are the changes that will affect international tax provisions? Dive into planning strategies that U.S. multinationals and foreign corporations doing business in the U.S will need to consider. For a more focused look, dive into these international topics:

Conferences

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